GYOR, Hungary (Bloomberg) -- Audi said a new sedan version of its A3 compact model will outsell existing hatchback and convertible variants to help narrow the gap with market leader BMW in global premium car sales.
"We assume every second A3 customer will opt for the sedan in the future," Josef Schlossmacher, an Audi spokesman, told journalists on Tuesday in Budapest ahead of a ceremony today at the manufacturer's plant in Gyor, Hungary, marking the start of the new sedan's production.
The A3 sedan will mainly be aimed at customers in the United States and China where sedans are more popular than in Audi's home European market.
It will arrive in showrooms in Europe in the third quarter with a starting price of about 25,000 euros ($32,150) in Germany. Sales in the United States will begin early next year. China sales will start at the end of this year. Audi will open a factory in Foshan, China, later this year to produce the sedan for the domestic market.
Audi has invested more than 900 million euros ($1.2 billion) to expand the factory, one of the world's largest engine manufacturing facilities, which also builds the TT sports car and the A3 convertible. The project more than triples the site's annual car production to 125,000 vehicles.
Profit from Audi is critical to funding a strategy by parent company Volkswagen Group to overtake General Motors Co. and Toyota Motor Corp. as the world's biggest automaker by 2018.
Audi accounted for 56 percent of the automaking group's first-quarter operating profit.
VW CEO Martin Winterkorn pledged in April to increase the group's presence in the premium-car segment, where profit margins are higher than for mass-market models.
VW said on Tuesday that it will sell as much as 1.2 billion euros in mandatory convertible notes, which are due to be converted into preferred stock by the end of November 2015, to help finance further growth. The sale raised 1.27 billion euros, a person familiar with the offer said today. The offer will complement a similar sale in November.
"Our aim is to maintain the favorable liquidity position, the strong capital structure and our good rating in comparison with Volkswagen's competitors," VW Chief Financial Officer Hans Dieter Poetsch said in a statement.
Volkswagen, Europe's largest automaker, also owns sports car maker Porsche, British ultra-luxury manufacturer Bentley and the Lamborghini and Bugatti supercar brands. Audi plans to dethrone BMW as the world's best-selling premium carmaker by the end of the decade. It has ranked second in luxury-vehicle deliveries since overtaking the Mercedes-Benz brand in 2011.
The three German automakers are all targeting record sales in 2013 as rising demand in China and the United States offsets a sixth consecutive year of industrywide declines in their home region.
Audi delivered 1.45 million cars and SUVs in 2012, its best year so far, with demand driven by the new A3 and fresh high-performance cars like the SQ5 SUV. By comparison, BMW brand reported unit sales of 1.54 million and Mercedes brand's sold 1.32 million.
BMW's namesake brand regained the monthly sales crown in May, after Audi beat it in sales in April, as the X1 compact SUV and new 3-series sedan won customers. BMW's global deliveries last month rose 7.8 percent from a year earlier to 139,161. That compares to 6.4 percent growth to 137,200 deliveries at Audi and a 7.3 percent jump to 121,360 at the Mercedes brand.
Audi expects a "slight" increase in revenue this year and an operating margin at the upper end of its long-term target range. Operating profit last year climbed 0.6 percent to 5.38 billion euros as revenue rose 11 percent to 48.8 billion euros. The 11 percent margin beat its target of 8 percent to 10 percent.
BMW, Mercedes and Audi are boosting production capacity outside Europe to tap rising demand and reduce exposure to currency swings. Audi held the groundbreaking for a plant in Mexico in May and is considering producing cars in Brazil.
The production expansion is part of Audi's efforts to break out of its Germany-dominated manufacturing network. Until 2009, Audi produced 75 percent of its vehicles in Ingolstadt and Neckarsulm. By 2017, the share coming from the German plants is forecast to fall to 45 percent as annual production rises to 1.9 million vehicles from 1.5 million units in 2012, according to data from IHS Automotive. Audi plans next year to build more cars outside Germany than within the country for the first time.
Automotive News Europe contributed to this report